The first two quarters of the year have been rosy for first-time homebuyers and real estate professionals alike, according to the latest report from the United States Commerce Department. Year-over-year sales for newly built single-family homes were up 10% as of July 2016, with no signs of slowing down.
By the Numbers
June 2016 saw a seasonally adjusted 3.5% growth over the previous month, rising to a 592,000 annual rate. This represented an over 25% growth from the same month in 2015 and marked the strongest monthly sales pace since the beginning of 2008. While the numbers come with a margin of error due to the volatility of newly-built home sales, the market is thriving — and seems poised to stay that way.
Even stronger were the numbers for previously-built properties, which make up the majority of the US housing market’s activity. A recorded 5.57 million annual rate made June 2016 the strongest market watermark since February 2007.
Limited Inventory, High Demand
While a strong market is a good problem to have, real estate professionals must deal with a new set of challenges. The actual construction of new home properties remain sluggish compared to previous economic expansion cycles, and high demand combined with limited inventory — a phenomenon particularly seen in newly-desirable urban areas such as Denver, San Francisco, and Austin — have led many to speculate that the growth rate is unsustainable. Even if the market fails to climb, however, its current pace is a supremely favorable one.
The Big Picture
The housing market has been a quiet but steady tailwind for the country’s overall gross domestic product, contributing nearly half of Q1 2016’s 1.1% growth. This is due to a combination of factors, most notably low mortgage rates that allow borrowers of all credit levels excellent home loans.
The mortgage drop was spurred in part by Britain’s much-publicized departure from the European Union, a decision that caused a ripple effect felt by homebuyers on the other side of the ocean. Plummeting pound values have caused investors to flock to relatively safe bonds instead of riskier stocks — and since mortgage rates depend heavily on 10-year Treasury yields, this influx has caused interest to tumble by over half a percentage point. While the long-term effects of “Brexit” remain to be seen, buyers will probably continue to swarm the market and lock down favorable mortgage rates as long as they are still available.
Lakeside Title Company: Title Insurance & Closing Support
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